Saturday, May 23, 2015

Robot employment act...

Robot employment act...  The image at right is from the article The Robot Employment Act? on Marginal Revolution.  The article discusses in some detail how a rising minimum wage causes an increase in automation (robots).

The economics of this are very straightforward.  Take a job that needs to be filled 24 hours a day, 7 days a week (typical for a factory job).  That's 21 shifts (8 hours each) per week.  To hire a minimum wage worker at $15 per hour costs the employer $131,040 per year in direct wages, plus roughly $25,000 more in social security, unemployment insurance, etc.  Call it $150,000 a year.  That actually understates the cost a bit, because there is more overhead associated with management, human resources, parking lots, break rooms, rest rooms, etc.  We'll ignore all that (though it's actually not insignificant). 

What does a robot cost?  Well, that depends entirely on exactly what that minimum wage worker was doing.  Some jobs are very easily handled by robots: repetitive assembly work, welding, parts painting, etc.  Some are less easily handled: short order cook, maid, house painter, etc.  These are difficult precisely because they require (or seem to require) human judgment, analytic capability, and motor skills.  However, progress in these areas is happening very quickly.  There are, for instance, fully operational short-order cook robots right now.  They don't look anything like the photo above; they're more like automated stoves with food and implement handling capability.  But they work, and they cost about $300,000 - plus $20,000 or so a year in maintenance and power.  Ask any businessman what he'd choose: a worker who costs $150,000 every year, or a robot that costs $300,000 up front and $20,000 a year thereafter, and you'll get the answer very quickly.  The robot wins!

If it isn't blindingly obvious why that's so, consider the 10 year cost of the worker versus a robot.  The worker would cost 10 x $150,000, or $1,500,000.  Ouch.  The robot would cost $300,000 + 10 x $20,000, or $500,000 – just one third the cost of the worker.  Furthermore, the robot is going to get cheaper and cheaper over time, and the worker ... will get more expensive.

This is how robots are going to take over.  They're going to be the cheapest way to get something done.  The minimum wage raising accelerates this process by forcing workers to cost more – and precisely the class of workers whose job is most easily automated.

Jeff Bezos at Amazon, with his robot armies in his warehouses, is leading the way...

No comments:

Post a Comment